Pareto Securities Oil and Offshore Conference Oslo, Norway September 2, 2015
Forward looking statements Certain statements and information contained in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Where any forward-looking statement includes a statement about the assumptions of bases underlying such statement, we caution that, while we believe these assumptions or bases to be reasonable and made in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material. Any forward-looking statement where our management expresses an expectation as to future results, such expectation is expressed in good faith and is believed to have a reasonable basis; however, we cannot assure you that the statement of expectation will result or be achieved or accomplished. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. Forward-looking statements typically include words or phrases such as believe, estimate, expect, forecast, our ability to, plan, potential, projected, target, would, or other similar words, or negatives of such words, which are generally not historical in nature. Such forward-looking statements specifically include statements involving: client contract opportunities; contract dayrate amounts; future operational performance and cashflow; contract backlog; revenue efficiency levels; construction, timing and delivery of newbuild drillships; capital expenditures; market conditions; cost adjustments; estimated rig availability; expected direct rig operating costs; shore based support costs; selling, general and administrative expenses; income tax expense; expected amortization of deferred revenue and deferred mobilization expenses; and expected depreciation and interest expense for our existing credit facilities and senior bonds. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. There can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions or dispositions. Our forward-looking statements involve significant risks and uncertainties (many of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations, plans or projections. Important factors that could cause actual results to differ materially from projected cashflows and other projections in our forward-looking statements include, but are not limited to: levels of offshore drilling activity, reduced capital expenditures by our clients and general market conditions; our ability to secure and maintain drilling contracts, including possible cancellation, renegotiation or suspension of drilling contracts as a result of market changes, mechanical difficulties, performance, regulatory or other approvals, or other reasons; changes in worldwide rig supply and demand, competition and technology; outcome of negotiations with the shipyard regarding construction delays; our ability to favorably revise our current debt covenants; unplanned downtime and other risks associated with offshore rig operations, including unscheduled repairs or extended maintenance; governmental action, strikes, public health threats, civil unrest and political and economic uncertainties; relocations, severe weather or hurricanes; environmental or other liabilities, risks or losses; governmental regulatory, legislative and permitting requirements affecting drilling operations; our ability to attract and retain skilled personnel on commercially reasonable terms; impact of potential licensing or patent litigation; terrorism, piracy and military action; and the outcome of litigation, legal proceedings, investigations or other claims or contract disputes. For additional information regarding known material risk factors that could cause our actual results to differ from our projected results, please see our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 20-F and Current Reports on Form 6-K. These documents are available through our website at www.pacificdrilling.com or through the SEC s Electronic Data and Analysis Retrieval System at www.sec.gov. Existing and prospective investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
Succeeding in a tough market Pacific Drilling distinguished by operational excellence and cost management Operational excellence more important than ever: expect market to be very tough for at least 18 months Clients want the rigs that deliver PACD management focused on minimizing downtime & maximizing rig efficiency PACD has highest average rig capability and industry-leading UDW operating performance Cost management is key, while maintaining longer-term optionality & marketability Rig opex per day reduced every quarter since beginning 2014 Recent initiatives delivering approximately $100 million annual run rate savings (~20%) G & A reduced over 15% during 2Q2015 Maintaining ability to restart idle rigs within 90 days of contract award while significantly reducing costs 3
Revenue efficiency illustrates high quality client service delivery Clients want rigs that deliver OPERATIONAL EXCELLENCE (%) 100 Mean 95.7% 95 90 85 80 75 70 65 60 55 50 96.9 2013 Q3 95.3 2013 Q4 Post-shakedown fleet revenue efficiency (1) 91.1 2014 Q1 97.1 2014 Q2 95.9 2014 Q3 98.4 2014 Q4 95.2 95.5 2015 Q1 2015 Q2 Already 9 wells in 2015 delivered ahead of client plan and budget across fleet Last 15 rig-years at >95% average uptime No significant well control events in company s operating history Highest efficiency rigs in the industry Mistral drilled 3 of 5 fastest wells in Lula field Santa Ana drilled 3 discoveries and is highest performer in Chevron US GoM fleet Scirocco delivering strongest operating performance in Total global fleet 4
Exclusively high-spec floater fleet positioned well for the limited market opportunities OPERATIONAL EXCELLENCE Full fleet days contracted as percentage of days available for 2015 and 2016 (2) 100% 100% 100% 89% 83% 87% 88% 71% 82% 69% 78% 64% 71% 65% 69% 68% 75% 55% 52% 55% 48% 46% 41% 44% 40% 51% 50% 54% 40% 33% 29% 28% 21% 5 Pacific Drilling Pacific Ocean Rig Seadrill Atwood Noble Rowan Ensco Transocean Diamond Drilling Offshore Percent Contracted 2015 2016 2015 2016 High-Spec Floater % Available NOTES: Pacific Drilling rig status as per July 7, 2015 Fleet Status Report with new assumptions of delivery delay of Pacific Zonda to 1Q2017. All other newbuild deliveries as per data from IHS-Petrodata. Newbuild availability assumed to be 4 months from delivery. Vantage Drilling
Solid $1.8 billion contract backlog OPERATIONAL EXCELLENCE Contract status as of August 27, 2015 2015 2016 2017 Pacific Bora Pacific Scirocco Chevron Nigeria, $586k/d 2 year extension Total Nigeria, $499k/d 2 year extension Existing contract provisions provide that any contract terminations are at least EBITDA neutral Pacific Mistral Available Pacific Santa Ana Pacific Khamsin Pacific Sharav Chevron USGoM, $490k/d 5 year contract CVX Nigeria, $660k/d 2 year contract Chevron USGoM, $558k/d 5 year contract Pacific Meltem Available Pacific Zonda Expected Delivery to Active Fleet: First Quarter 2017 6 Construction Mobilization Firm Contract
$32m cost savings delivered; $75m total 2015 target; $100m annual run-rate target Sources of savings COST MANAGEMENT Labor and personnel costs Maintenance expenses Operations expenses Miscellaneous expenses Travel Variable compensation elements Overhead headcount Benefits Training Engineering & major projects Deferral of noncritical normal and project maintenance Materials & supplies Catering Customs Rentals Vessel inspections Agent fees Communications Insurance Other drillingrelated costs Supported by 3 rd party price reductions Targeting on contract average rig opex reduction from $178k/day (in 2014) to < $160k/day; Opex was < $170k/day by the end of 2Q15 7
Smart stacking results in idle rig costs of <$40k/day without incremental investment Direct rig-related opex per day ($k) COST MANAGEMENT 180 178 160 Miscellaneous 140 Operations 120 100 Maintenance 103 Smart stacking efficiencies 80 75 60 40 Personnel 18 15 2 40 20 8 0 Historical operating Conventional stacking savings Historical stacked Personnel savings Non-critical maintenance savings Rigs ready to work in <90 days Idle rig cost < $15m/yr Misc savings Smart stacking
Cost saving initiatives driving stronger 2015 guidance COST MANAGEMENT Revised and expanded full-year 2015 guidance for certain items Item Old Range New Range Average revenue efficiency 92% - 96% 94% - 96% Contract drilling expenses $500 million - $525 million $425 million - $450 million General & administrative expenses $63 million - $66 million $55 million - $58 million Income tax expense as percent of total contract drilling revenue 3.5% - 4% 3% - 3.5% EBITDA (3) NA $575 million - $615 million 9
Continuing to deliver industry-leading EBITDA margin with only 5 rigs on contract FINANCIAL STRENGTH Range of adjusted EBITDA/revenue for offshore drillers (3),(4) 65% 60% 55% 50% 45% 40% 35% 30% 25% 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 PACD Peer Offshore Driller Average NOTES: Peer Offshore Driller Average includes PACD and publicly available information for ATW, DO, ESV, NE, ORIG, RDC, RIG, and SDRL. EBITDA is as reported by Bloomberg (adjusted to remove impacts from impairment for DO, RIG, ESV, NE). 10
Projected positive EBITDA through 2017 even with no additional contracts FINANCIAL STRENGTH Revenue ($m) 1050 335 1086 1090 715 1140 860 280 Costs ($m) 555 485 115 280 518 494 370 275 2014 2015 2016 2017 2014 2015 2016 2017 EBITDA ($m) 565 220 563 596 345 585 580 5 In absence of new contracts, liquidity sufficient to meet all expected cash uses through refinancing of Khamsin at end of 2017. 11 2014 2015 2016 2017 Actuals Current backlog only Potential future backlog NOTES: EBITDA projected using $300k/day for contract rollovers/extensions, or as otherwise under discussion with clients. Projected EBITDA assumes operating fleet size of 7 rigs at end of 2016 and 8 rigs at end of 2017. Costs as per guidance on slide 9. Includes assumptions for idle time prior to or between contracts for rigs which are currently uncontracted.
Operating cash flow and existing facilities expected to cover 2017 debt maturity FINANCIAL STRENGTH As of July 21, 2015, existing facilities provide up to $700 million of undrawn capacity Excess liquidity available to repay existing borrowings as necessary $1,125 615 $1,740 935 Operating cash flow through end 2017 500 500 401 224 105 150 550 Existing cash Conditional debt (5) Currently available debt capacity (6) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Total commitments Debt Amortization Capex Debt Maturity Sources through end of 2017 NOTES: Capex as per Investor Toolkit dated Mar. 31, 2015. Commitments shown as net of gross interest since interest has been deducted when calculating cash flow from operations. Cash flow from operations projected using $300k/day for contract rollovers/extensions, or as otherwise under discussion with clients. Projected cashflow from operations assumes operating fleet size of 7 rigs at end of 2016 and 8 rigs at end of 2017. Costs as 12 per guidance on slide 9. Includes assumptions for idle time prior to or between contracts for rigs which are currently uncontracted.
Valuation attractive relative to peers before benefit of cost saving initiatives Thomson Reuters consensus as of July 20, 2015 FINANCIAL STRENGTH FY2015 Multiples PACD Peer Average Price/Earnings 4.38 5.42 Price/Cash Flow 1.38 2.47 Price/Book Value 0.32 0.51 13 NOTES: Peer Offshore Driller Average includes ATW, DO, ESV, NE, ORIG, RDC, RIG, and SDRL
Ongoing initiatives to further strengthen financial position FINANCIAL STRENGTH Delay of Pacific Zonda delivery currently under discussion with shipyard Initiated discussions with agent banks for post-2015 debt covenant revisions Further cost reductions to include: - Rationalization of non-critical maintenance expense and capital expense - Further optimization of rig stacking - Additional adjustments to personnel costs - Additional improvement of vendor terms 14
Investor contact Pacific Drilling John Boots VP Finance & Treasurer 8-10 Avenue de la Gare L-1610 Luxembourg Luxembourg Phone: +352 26-84-57-81 Email: Investor@pacificdrilling.com www.pacificdrilling.com 15
Footnotes 1. Revenue efficiency is defined as actual contractual dayrate revenue (excluding mobilization fees, upgrade reimbursements and other revenue sources) divided by the maximum amount of contractual dayrate revenue that could have been earned during a certain period. Post-shakedown revenue efficiency represents levels of average revenue efficiency which are typical for ongoing operations. Revenue efficiency is typically lower during shakedown, when a newbuild rig is undergoing the initial break-in of equipment. 2. Data from IHS-Petrodata as of Jul. 8, 2015. Pacific Drilling rig status as per July Fleet Status Report. Assume delivery delay of Pacific Zonda to 1Q2017. Rig specification analysis & classification index by Pacific Drilling. Chart includes all floating rigs of classification index >5.5. Newbuild availability assumed to be 4 months from delivery. 3. EBITDA is a non-gaap measure. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The most comparable GAAP financial measure to EBITDA is net income, which includes interest, taxes, depreciation and amortization. EBITDA is included herein because it is used by management to measure the company's operations. Management believes that EBITDA presents useful information to investors regarding the company's operating performance. 4. EBITDA margin is defined as EBITDA divided by contract drilling revenue. Management uses this operational metric to track company results and believes that this measure provides additional information that consolidates the impact of our operating efficiency as well as the operating and support costs incurred in achieving the revenue performance. 5. Under the existing terms of our 2014 Revolving Credit Facility, we currently will have access to $150.0 million, provided that Pacific Zonda is delivered prior to October 31, 2015 and a satisfactory drilling contract is signed. 6. Unconditional debt capacity post-q2 increased to $615m. 16